Investors retreat from risk assets as JPMorgan raises recession odds

Fears of a U.S. recession have intensified as JPMorgan increased its recession probability for 2025 to 40%, up from 30% earlier this year.

Analysts cited "extreme U.S. policies" and macroeconomic uncertainties as key drivers behind the revised outlook.

Goldman Sachs also raised its 12-month recession forecast to 20%, warning that the probability could rise further if current policies persist.

The financial markets have reacted sharply to these concerns.

On March 10, the S&P 500 fell 2.7%, reaching its lowest level since September, while the tech-heavy Nasdaq dropped 4%, marking its worst day since 2022.

The Dow Jones Industrial Average also declined nearly 900 points, or around 2.1%.

Collectively, America’s top tech firms—the "Magnificent 7"—shed over $750 billion in market capitalisation in a single day, with Tesla alone plunging 15%.

The cryptocurrency market mirrored these losses, with total market capitalisation falling by 7.5% to $2.6 trillion on March 11.

Bitcoin dropped below key support levels, hitting $76,784 before recovering slightly to $79,000.

Despite these developments, Kevin Hassett, head of the National Economic Council, downplayed recession fears, stating that the U.S. economy is undergoing "a period of transition" and remains fundamentally strong.

President Donald Trump echoed this sentiment in a recent interview, emphasising optimism for long-term economic growth.

However, economic forecasts remain cautious.

Morgan Stanley has lowered its GDP growth projection for 2025 to just 1.5%, with expectations of further slowing in 2026.

Analysts suggest that continued market volatility could force a showdown between Trump’s administration and Federal Reserve Chair Jerome Powell over interest rate policy.

The Federal Reserve is expected to maintain its current interest rate range of 4.25% to 4.5% at its March meeting, but market watchers are divided on whether rates will be cut later this year.

The CME FedWatch tool indicates a near-even split on the likelihood of a rate reduction at the Fed's May meeting.